(formerly "A Clue...to Internet Commerce")
by Dana Blankenhorn
Volume II, No. XLV
For the Week of November 9, 1998

This Week's Clue: A Confederacy of Dunces 

SSP (Shameless Self-Promotion)  

Search Engines Seek Identity 

Nothing Ever Was Free 

The Smoking Gun in Re: U.S. vs. Microsoft 

More on Selling Clothes 

Clued-in, Clueless

This Week's Clue: A Confederacy of Dunces  

Jupiter Communications will bring the latest edition of its "Digital News Forum" to Atlanta on December 8. They prefer CEOs as speakers to reporters or analysts, and they try to use star-power in hopes of building high-quality schmooze. 

On most subjects, it's a good plan. I'd love to get inside Jeff Bezos' strategy sessions at Amazon, or hear what Neil Weintraut would like to invest in next. There are even Clued-in publishers, like C|Net's Chris Barr, who are well worth the plane fare. 

But the list of speakers assembled for this show is a roster of losers. Question: what do Forbes, MSNBC, the Washington Post, Time New Media, and Cox Interactive have in common? It's not a Clue. You won't find a profit on that roster either. 

Why this incredible failure? The obvious problem is an insistence on treating the Web as an offshoot of print or broadcast. The less-obvious problem is insisting on looking at what they offer first as an editorial package, and only later as a business. The 19th century "penny paper barons" like Pulitzer, Medill and Hearst didn't look at things that way. The 20th century broadcast titans David Sarnoff and William Paley didn't look at things that way. They saw the business opportunity first, and fit their products to meet it. Looking at the product before its business case is like looking at the rear end of a donkey and expecting something useful to come out. (That only works if you're growing flowers.) 

What is the business case for, say, a local news organization? It is to organize the retail market. The complete failure of, say, the "Atlanta Journal-Constitution" to find a profit online can be found with a simple content analysis of its print advertising. The business section is real estate ads, the living section entertainment ads, the sports section cars, computers, and "personals" from lonely women. What's the news section (supposedly the purpose of the whole thing) got for advertisers? Most days, it's downtown department stores

People who work at the paper like to think they're a monopoly (especially in Atlanta, where Cox also owns the top TV and radio outlets), but nothing could be further from the truth. In print alone, Atlanta is home to a thriving business weekly, a free entertainment weekly, a computer monthly, and a host of neighborhood and lifestyle papers. Each of these publications steals a slice of the AJC's advertising pie, taking advantage of the paper's high circulation (thus its high ad rates) and lack of focus. 

Newspaper chains have the capital to build databases of neighborhoods and shops that other local players lack. They have the staffs needed to populate those databases, and massage them to provide service. A large, organized staff, in other words, can recreate the papers' original business case. But since there's no Clue at the top as to the paper's business case on the Web that won't happen. 

The problem is that journalism businesses are divided into two parts - editorial and advertising - but what's needed on the Web are people in the middle. What's needed on the Web are people who'll find, and link to, local products and services on the one hand, and people who'll be committed to making clients successful on the Web on the other hand. Both these roles mix editorial and business concerns. The linkers must forget the fact that the links aren't paid-for, and concentrate on serving the users' interest. The business advisors must forget the fact that competitors' links will get placement next to their clients' ads, and concentrate on finding people who'll want to buy from those clients. More important, the aim of both linkers and advisors must be identical, namely to provide a bridge for local commerce. 

Let me give you one example of how this should work, from my own neighborhood. There's a small hardware store here named Bailey's that's been around since before integration. They have a very small store, and a very limited budget. They need, badly, to connect with the new residents who are gentrifying their neighborhood, to become the first place they turn to for help and advice, as well as hardware products. 

There's a lot that a local Web site can do to spur that. They can get Bailey's an e-mail address, help them build a mailing list of regular customers and deliver e-mail with real service. Bailey's doesn't need a Web site - what they need is a connection to their customers. And they'll be happy to pay for it, with online coupons buyers can redeem for discounts on rakes, mousetraps, wheelbarrows, and other items. How much money exists in such a project? Maybe 5% of Bailey's gross -- I'd estimate $5-10,000/year. 

There are dozens of businesses like Bailey's just in Kirkwood, an area where $20,000/year is considered a good living. There are also hundreds of such neighborhoods throughout the Atlanta metro area, enough to build a really huge business. But such a business will not be built by someone who sees journalism as a process of aggregating eyeballs for advertisers. It will only be built by someone who goes back to basics, to the original business case for local journalism. That is, organizing the local market, bringing buyers and sellers together, and encouraging the market in its growth and development. 

Here's the final irony. There's a statue in front of the "Atlanta Journal-Constitution" offices of a man whose life embodied this key Clue. I drive by that statue twice each day, while taking my kids to school. The statue is of a man named Henry Grady. He was editor of "The Atlanta Constitution" in 1881, when he organized a trade fair called the Cotton States Exposition here and gave what became known as his "New South" speech. Part of that speech (we still don't like black folks) was stupid and antique, the other part (Atlanta's ready to do bidness) was this city's Gettysburg Address. Sometimes what you're looking is right in front of you all along. 

Oh, don't worry. I'll let you know when there's an event in Atlanta worth coming to. 

SSP (Shameless Self-Promotion) 

I spent time last week examining the A-Clue.Com e-mail list, looking for duplicated and unusable addresses. If you get two copies of this e-mail, please let me know at dana.blankenhorn@att.net. Let's do our bit to reduce Internet glut. 

You can now order "Web Commerce: Building a Digital Business,"  by Kate Maddox with yours truly (but with on the cover) through Barnes & Noble. It's on sale at $20.95, (down from a cover price of $29.95, and down from Amazon's price of $27.95) part of the Wiley/Upside series. You can also read a review of the book, from Dr. Ralph Wilson, by clicking here

A-Clue.Com has also been picked up by Andover News  as its Monday e-commerce column. Thanks to you, A-Clue.Com now goes to well over 1,000 Clued-in subscribers each week. Thanks to Multimedia Marketing Group  a UnityMail  customer, it's also an in-line HTML file (no more messy Web codes). Besides producing A-Clue.Com, I contribute regularly to such publications as Net Marketing , Boardwatch, Datamation , and Advertising Age . Your magazine can join the list - send me an e-mail and let's start the ball rolling. 

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And now back to our show... 

Search Engines Seek Identity  

Can we talk about the major search engines for a moment without using the "p" word? Let's look at them, instead, as new oil millionaires seeking an identity, and let's look at those identities. 

Yahoo seems dedicated mainly to its shareholders. It's buying profitable businesses - ViaWeb and Yoyodyne - in order to diversify its revenue stream. But, IMHO, it's not investing enough in those new businesses to make them viable. Excite is doing the most to copy America Online, building its own mall, and taking millions from Clueless merchants for the privilege of having space in it. The new community even has its own pollster . (Harris' Excite poll predicted Republican Guy Millner would be Georgia's next Governor. Democrat Roy Barnes won by over 150,000 votes out of 1.8 million cast.) Lycos is seeking attention for what it already has, and has poured $25 million into making a Labrador Retriever into its new corporate symbol

Infoseek, however, has actually stuck to its knitting. It's building a Java-based search engine called Javaseek it will offer to other sites (like this one), and it will reportedly give the source code away. Now, you can argue that with Mama Disney handling the driving of traffic to the site, Infoseek has the space and time to add technology. But technology is the heart of this business - a search engine without technology is just NetCenter. Let's give Infoseek another thumbs-up... 

Nothing Ever Was Free  

One vital point ignored in the debate over "free" Web content is nothing ever was free. Whether or not you charge for subscriptions, whether or not you are charging even 1/10th of 1 cent to read a story, readers are still paying you with a vital commodity - their time. 

When looking at new advertising revenue sources, it's important to remember this fact. I thought about this while reading that IC Systems Inc.  of New York is seeking a patent  for its "IC Broadcasting." The technology claims to sneak full-screen, commerce-enabled ads between clicks. 

In theory, this is like using the "vertical blanking interval" between TV screens (you see it when the vertical hold goes out) to send commercials, which is done all the time. Before you get overly excited, however, answer this question. How do you like getting hijacked? You can claim we're forced to watch 30-second TV ads, but we're also free to leave the room. That's not true with IC Broadcasting - there are differences between couch potatoes and mouse potatoes. And IC Systems is gleefully claiming there's no way out - filters won't stop its ads from reaching users. Unless all Web sites adopt this, users will run from sites that do adopt it. If all Web sites adopt it, many will leave the Web entirely. (Don't confuse the Web and the Internet. Most international visitors spend most of their online time using e-mail.) 

What's really wrong here is the assumption that "attention" to an ad, reflected in CPM, is a real commodity. It's not. Unless an ad leads to sales, it's useless. The guess here is these ads won't lead to many sales, that they'll be seen as the eye-spam they are. Remember that point as you watch this "idea" evolve... 

The Smoking Gun in Re: U.S. vs. Microsoft  

It may be too late to get this into evidence, but the "smoking gun" on what Microsoft seeks to do with its monopoly power has been found. There's now proof Microsoft is using all its power to crush all opponents, even those who don't live in the real economy. 

Now, if Microsoft did not have a commanding share in operating systems software, a memo like this, as analyzed by a leading open source software proponent,  would mean nothing. In a competitive market, it's perfectly OK to plot against your enemies. It's only when you accept that Microsoft holds a monopoly position in PC operating systems (or when you accept that the Earth goes around the Sun) that tactics and attitudes such as those revealed here become a problem. Bill Gates knows this. It's why he's been so lawyer-like in his own testimony, and why more companies are going to erase their e-mail and discussion groups in the future. 

Now, would we be better off if Microsoft were broken up? As customers, it's likely we would not be better off. We'd soon be paying more for our PC operating systems than for the hardware they'd run on. The monopoly in office suites so well documented in the case of Apple and MacOffice would remain, unless Office were given to the operating system company. It would take years to create real competition in application areas where Microsoft has embraced-and-extended itself. And the whole question of extending the OS with new features (pioneered by competitors) would still need to be addressed. But this much, unfortunately, seems clear. The thought of Microsoft's break-up was once unthinkable - we need to think about it. 

More on Selling Clothes  

News that the Gap has finally opened its online stores gives me another chance to emphasize the big problems with selling apparel online, problems none of the new players in this market  have effectively dealt with. 

Those problems are size and color. I got a hint on the sizing problem the other day, when my wife sent my son and I into the storm to verify how big his new school pants  would have to be. She'd attacked him with a tape measure and come up with a Size 10 husky. John and I spent a few minutes at a store and came up with a Size 8 regular. Obviously, Clued-in sites need to produce clear, concise directions for taking measurements, to avoid returns. 

Catalog retailers have known the secret to the color problem for years - Pantone . Pantone ColorReady matches the color on the skirt to the color on the screen. But where's Pantone on the Web? I'm not talking about the online availability of the software, but honest talk about the problem at store sites and education on what sites have done to deal with the problem. 

Until clothing stores use these key Clues, and overcome these objections to sales, their Web stores will be seen for what they are - defensive and Clueless. 

Clued-in, Clueless 

Clued-in is Comedy Central . Instead of fighting fans of its "South Park" show in court, it's offering free content, with proprietary technology and links back to its site, advertised through Lycos The contrast with StarTrek, which attacked its Web fans a few years ago (and whatever happened to that franchise?) could not be more obvious. 

Clueless (and it's about time someone said so) is Barry Diller, who dropped computing equipment from his marginal Internet Shopping Network  site in favor of the junk favored on his Home Shopping Network cable channel. Many people confuse Diller's HSN with Clued-in QVC, and thus assume Diller knows something about the Internet. That's a smear against QVC. 

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